ECB keeps still in fast-changing world 8 Sep 2011 The central bank signalled an end to interest rate increases, and acknowledged a global slump is now a higher risk than inflation. President Jean-Claude Trichet sees the ECB as an “anchor” in financially troubled times. But there’s a fine line between stability and immobility.
Jingdong IPO tests U.S. appetite for China stocks 8 Sep 2011 The Amazon lookalike, unknown outside China, hopes to raise up to $5 billion in a U.S. listing. Jingdong’s scale and growth speed are exciting. But rising doubts about Chinese Internet darlings will test demand. It is a bold bet in a tough market.
China’s hidden debt undermines its sermons 8 Sep 2011 The government’s stated debt is just 15 percent of GDP. But a gaping pension hole and heavy borrowing by state-backed entities could leave Beijing on the hook for debts closer to 130 percent of GDP. That makes China’s preaching over profligate American ways ring a bit hollow.
Stated numbers don’t tell China’s inflation story 8 Sep 2011 Consumer prices rose 6 percent in August, official statistics are likely to say. But like most Chinese data, that’s a guide not a fact. For savers, inflation probably feels higher. Depositors and politicians are worried. Investors cannot afford to be complacent.
Only Drachmaization can save Greece and euro 8 Sep 2011 Regional comparisons suggest Greek living standards rose far beyond productivity, making austerity inadequate to rebalance the economy. Drachmaization would allow the market to set wage levels, induce other weak countries to reform without EU prodding and thus solidify the euro.
Ukraine-Russia gas spat likely to cost Gazprom 8 Sep 2011 Autumn is coming and Russia and Ukraine are again squabbling over gas. Neither has an interest in a rerun of the 2006 and 2008 supply disruptions. The likely outcome is that Russia lowers prices in return for political concessions. State-backed Gazprom would be the real loser.
Ohio oil promises new bonanza for Texas bankers 7 Sep 2011 The first takeover deal in the Utica shale may be modest, but it’s only a start. Some $38 bln of shale-related deals this year account for 80 pct of U.S. exploration M&A. If Ohio’s rock formation yields even half its touted oil trove, energy financiers should be sitting pretty.
Legal surrender hurts SEC more than shareholders 7 Sep 2011 The U.S. regulator won’t appeal a ruling that blocked more investor power to challenge corporate boards. That’s understandable given the legal risks and alternative proxy options. But it preserves a precedent that makes it far more arduous for the agency to implement new rules.
Facebook puts Web 2.0 rivals in appropriate light 7 Sep 2011 Tech companies like Demand Media and Pandora have shown how investors can take a shine to profitless growth. But Groupon’s troubles partly show how fickle such approval can be. Facebook’s fast-growing bottom line is a stark reminder of exactly what’s missing from Silicon Valley.
Tony Hayward joins risky Kurdish oil rush 7 Sep 2011 The ex-BP boss’s M&A vehicle has landed its first target, a $4 bln merger with Kurdistan’s top oil producer. The deal is part regulatory arbitrage, and part a bet that Iraqi politics will turn good for oil firms. On conventional metrics, it’s a bargain. But it brings major risks.
Goldman Sachs should consider its own breakup 7 Sep 2011 The Wall Street firm helps companies like Kraft boost their shares by splintering into pieces. So it’s logical that some inside Goldman have run the numbers on their employer. Should Goldman’s stock price linger below book value for long, a breakup could be hard to resist.
Romney’s only new economic idea is a bad one 7 Sep 2011 The GOP presidential hopeful unveiled a 160-page blueprint to cut taxes and costs. But it’s largely a rehash of his 2008 ideas, and it’s hard to find the fingerprints of his elite economic team. Indeed, they probably frowned on the big new concept: an anti-China trade policy.
Uncle Sam can’t play China’s solar subsidy game 7 Sep 2011 The bankruptcy of Solyndra undermines a U.S. loan guarantee scheme that backed $535 mln of the firm’s debt. Going head-to-head against China on solar panel production is pure folly. A wiser use of tax dollars would be to try and leapfrog the Middle Kingdom on research.
German high court spares euro zone a major crisis 7 Sep 2011 The Karlsruhe constitutional court has thrown out complaints against the region’s bailout facility, and its ruling shouldn’t overly hurt the fund’s flexibility. Disaster may have been averted on the German front, but the euro crisis is still looking for a long-term solution.
Toothless U.S. say-on-pay still biting CEO perks 7 Sep 2011 The SEC’s mandated votes may be non-binding, but they’re no bust. Though shareholders approved almost all executive pay packages in the recent proxy season, many firms preemptively cut golden parachutes to ensure victory. Investors are speaking softly but carrying a big stick.
Rubenstein won’t easily snatch Schwarzman’s crown 7 Sep 2011 The Carlyle and Blackstone private equity powerhouses both manage about $150 bln of assets. But Carlyle has less steady fee income. If investors looking at Carlyle’s new IPO filing value the firm the same way as Blackstone, it would be worth only about $7.5 bln, or half as much.
Weakening UK growth creates tax cut Catch-22 7 Sep 2011 The UK chancellor is toning down hopes for UK growth. Tax cuts, as suggested by some economists, would help growth and are desirable. But the deficit reduction plan looks behind the curve, making it hard for Osborne to justify cuts. Faster spending cuts would have helped.
Abu Dhabi’s Mubadala humbled in Carlyle IPO 7 Sep 2011 The Abu Dhabi fund may have lost up to half the value of its $1.85 bln signature investment in the U.S. private equity firm. Mubadala looks to have clawed back some of its losses on its original 2007 punt in 2010, but it’s unlikely to be enough to spare the emirate’s blushes.
New Yahoo CEO challenge: to dismantle the beast 7 Sep 2011 Fixing the $16 bln Internet firm is proving tough thanks to its many dysfunctions. Firing Carol Bartz looks a step forward, even if the hapless board did so in characteristically shambolic fashion. A breakup is probably needed, but may be hard with the founders calling the shots.
Moynihan edges toward control – and responsibility 7 Sep 2011 The BofA boss didn’t just inherit Ken Lewis’s mess but also his people. Ousting Sallie Krawcheck and Joe Price to consolidate power partly addresses this. His predecessor’s failings aren’t his fault, but Brian Moynihan will now be more squarely on the hook if he can’t fix them.
AT&T bet on T-Mobile puts CEO, board in crosshairs 6 Sep 2011 The U.S. telco has wagered $6 bln that it can beat regulatory opposition and buy T-Mobile USA. The net benefit of the $39 bln purchase could be in the same ballpark. But few experts thought the odds were better than 50-50. The AT&T boss and directors may have made a poor call.
Brazil’s economy should shed its Italian side 6 Sep 2011 Output from South America’s powerhouse is on a trajectory to surpass Italy’s. But the country shares many of the inflexible policies and bureaucratic trappings that have hampered Italian growth - and isn’t doing enough to change them. Brazil must liberalize before it’s too late.
Obama’s 2012 hopes may rest on jobs plans 6 Sep 2011 The guy already in the Oval Office wins re-election some 70 pct of the time. But a weak economy can even the odds. As Obama readies a big speech on Thursday, by some forecasts he may now be the underdog. Even so, any Republican challenger still needs a persuasive message.
James Murdoch stuck in limbo 6 Sep 2011 Serious questions still dog the News Corp exec after the latest UK parliamentary hearings into phone hacking. But challenges from two of his former staff lack decisive proof. Murdoch’s articulate and sure manner, and the fact he’s up second, give him an advantage.
UK bank upstart seeks two-step path to Lloyds deal 6 Sep 2011 NBNK is mulling an offer for the UK assets of National Australia Bank. A successful deal could give the bid vehicle an advantage in acquiring the branches Lloyds is being forced to sell. But in tough markets, convincing investors to cough up the cash looks a challenge.
U.S. mortgage suits inflict super-damages on banks 6 Sep 2011 The latest U.S. regulatory assault for mis-selling mortgage securities has dragged down bank stocks. But damages previously sought from UBS, and the performance of the underlying loans, suggest the impact of this particular banking nasty is now more than priced in.
Swiss franc defence will work – at a price 6 Sep 2011 If the Swiss National Bank keeps its promise to buy “unlimited quantities” of foreign currency, its effort to peg the franc should succeed. Given the euro’s big risks, the central bank may lose money again. But the gamble is an attempt to prevent recession and deflation.
Nigeria deals the dollar another blow 6 Sep 2011 The oil-rich African state will invest about $3 billion of its foreign reserves into China’s currency. High inflation and closed markets make the yuan a poor choice. Nigeria’s goal may be to secure investment flows: still, it is another sign of the dollar’s weakening influence.
Battle of the M&A machines rewards target’s rebuff 5 Sep 2011 Investors were narked when Charter snubbed a $2 bln approach from a turnaround specialist in June. They got even more upset when markets tumbled. But the UK-listed engineer’s initial suitor remains keen and a rival outfit may counterbid. Charter’s intransigence could yet pay off.
ECB should cut rates now 5 Sep 2011 It would be an embarrassing U-turn but the European Central Bank should swallow its pride and reverse its recent interest rate rises. The euro zone risks falling back into recession even in its core economies, worsening the crisis in its weaker members. Rate cuts are essential.